Time to Rethink Mortgage Lending StandardsYour editorial...

LETTER TO THE EDITOR

Your editorial cartoon of Dec. 30 -- showing homeless people outside a bank that is advertising record-low home mortgage rates -- points out a harsh irony.

While home ownership is, in fact, less costly today than it has been for many years, homelessness is stubbornly on the rise. This seemingly contradictory situation deserves a closer look.

First, most homeless people aren't in the market for home ownership. What they need is affordable rental housing, which they can't find.

There's simply not enough new affordable housing being created, while the existing rental market is overloaded with people who rightfully ought to be able to become home owners.

This excessive demand helps keep rents high, even as prices and interest rates fall on houses for sale. Many bargain houses languish on the market until they are sold -- not to owner-occupants -- but to absentee investors who turn them into still more overpriced rental units.

Why aren't more tenants becoming owners? A major factor is the overly restrictive policies of banks and other mortgage lenders.

Lending officers who earn commissions based on home sale prices easily find ways to deny mortgages for low-priced houses: They don't want to "waste time" on such unprofitable deals.

At the same time, bank underwriters look askance at low-income people, especially self-employed persons, "non-traditional" household structures and individuals who lack conventional credit history.

This fall, the General Electric Mortgage Insurance Company published a new set of underwriting guidelines based on their study of over 17,000 low-income home buyers. The GE firm concluded that low-income "describes the amount of money people have . . . [not] the risk they represent." The GE guidelines would allow thousands of tenants to become owners, potentially freeing up thousands of rental units.

Since GE's publication, lenders have no excuse for failing to adopt more liberal underwriting practices. They should also develop policies for ending discrimination against small home loans.

Restrictive underwriting also prevents developers of low-income housing from working at capacity.

Baltimore has more than 20 private, non-profit organizations involved in building and rehabilitating houses for the low-income rental market. Most of them have excellent records of repaying ++ loans. Because these developers lack conventional collateral, bankers shun them.

To acquire properties for rehabilitation, developers have to rely on hard-won grants and government financing programs that are notoriously slow-moving. Here, too, banks can afford to loosen up.

Plainly, there are many other factors involved in our housing shortage. Federal funding for low-income housing is inadequate, and the Clinton Administration wants to cut it still further. Many homeless people have problems that can't be resolved by housing alone.

But if we're looking for private-sector solutions to social problems, we should look first at the banks. They have an obligation, spelled out in the Community Reinvestment Act of 1977, to help meet the credit needs of their communities.

They also have a unique self-interest in preserving cities like Baltimore. A high level of homelessness is not only morally unacceptable, it is inimical to the economic vitality of our city and of our region.

Tom Chalkley

Baltimore

The writer is director of the Maryland Alliance for Responsible Investment.

It is ridiculous that one can drive in this modern day and age and in this advanced state, yet not be sure of whether or not one is liable to receive a ticket for breaking the law.

In order to cure this ill, I have given the situation substantial thought and have devised a modest proposal which I believe will alleviate the problem.

Would it not be possible for the State of Maryland to provide for all drivers a detailed map of the state and all counties within it, with the specific speed indicated for each jurisdiction above which one can expect to receive a ticket?

I suggest that a new map be drawn up each year and provided free of charge to everyone who obtains or renews a driver's license during that year. They would be available at a nominal charge -- just to cover the printing costs -- to anyone at any time, from the Motor Vehicle Administration.

Should the cost of reviewing and reprinting the map yearly prove to be prohibitive, perhaps MVA could provide the same information in tabular form, broken down either by counties or by route numbers, again with the upper restriction of pace clearly shown.